Extending the TCE Framework

Abstract

Based on the previous state of the art of prior research on make-and-buy, this chapter will provide the development of a theory of make-and-buy. The aim of the make-and-buy frame-work is to explain the determinants, the management, and the performance implications of make-and-buy. In order to accomplish this goal, I follow (2001) who describe the process by which theory is built and provide some advice of how this process can be improved. The authors propose three steps of “building better theory” (Christensen et al., 2001:4): First, the phenomenon of interest has to be described carefully in words and numbers. This has been done in chapter 2. Second, with the phenomenon observed and described, researchers have to find categorization schemes. Here, the authors suggest circumstance-based categorization in contrast to attribute-based categorization schemes, because “categories of circumstances [that] enable a theory to state what causes what, and why, and to assert how that causal chain might yield different outcomes in different situations.” (Christensen et al., 2001:11).The hitherto standard framework (=categorization) 52 for exploring questions of make vs. buy is TCE (e.g. Leiblein, 2003), in which the governance choice of make vs. buy is categorized according to the asset specificity of the underlying transaction. 53 It has been argued in chapter 3 that the TCE categorization scheme is not appropriate to explain make-and-buy. Third, theories can be built that explain the behavior of the phenomena, i.e., to state what causes what, and why, must be based on appropriate categorizations. Since this is not given in the existing framework (=TCE) a new and appropriate categorization scheme has to be found in order to develop a theory of make-and-buy.